Ofcom’s Review Could Lead to Further Deregulation

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Ofcom launched a major strategic review of the UK’s digital communications markets as it seeks to ensure that the industry continues to meet the needs of end users. The last such review lasted almost two years, and ultimately led to the separation of BT’s access network. This time round the review is unlikely to focus on a further separation of the incumbent; instead it will ask where further deregulation can take place as a result of competition coming from so-called OTT players.

Matthew Howett, Practice Leader, Regulation, Ovum comments:

“The review is taking place against the backdrop of the biggest shake-up of the industry for more than a decade, with both BT and Hutchison’s Three trying to convince competition authorities that their acquisitions of EE and O2 respectively should be given the go-ahead. This presents a challenge for Ofcom as it tries to envisage what the landscape will look like in the years to come. Clearly the review needs to consider these mergers – and indeed it will be useful input for the advice Ofcom gives to the relevant competition authorities. However, the regulator is keen to downplay this aspect, instead attempting to focus on how the review could lead to further deregulation of the sector. This is where OTT comes in.

Although Ofcom is a converged regulator, it still largely regulates things in their individual silos and within the fairly narrowly defined structure of the European telecoms framework for regulating markets. As new, more nimble players such as Skype and WhatsApp have arrived on the scene and competed away traditional telco revenues, regulators have been somewhat constrained in their ability to react, and certainly have not responded in the way telcos might have liked. This review presents an opportunity for the regulator to properly consider the impact these competing services are having on the sector, and whether this impact warrants further deregulation of the traditional communications markets along the lines of what telcos have been demanding.

It would not be entirely cynical to think that the review will focus mostly on this aspect rather than on issues such as a further separation of BT or new wholesale access requirements – just a couple of areas under the spotlight as the proposed mergers are considered. Instead these are likely to be addressed as part of the proposed remedies to get those deals approved. Ofcom’s wider strategic review could then be revisited once the dust settles following any eventual industry consolidation.”